Oil prices continue downward spiral

Oil prices have continued their retreat, showing losses of more than 10% from October's record highs, as an easing of supply worries overcome the positive effects of the US election.

05 Nov 2004 13:29 GMT

Fears of a winter oil shortage in the US have abated

New York's main oil contract, light sweet crude for delivery in December, fell 10 cents to $48.72 a barrel on Friday in electronic trading.

The contract tumbled by more than $2 a barrel on Thursday to a six-week low as traders' relief at a sharp rise in American crude inventories finally overwhelmed a rally sparked by the re-election of US President George Bush.

In London, the price of Brent North Sea crude oil for December delivery was unchanged at $46.01 a barrel.

Concerns linger

Fears of a winter supply crunch in the US abated after the US energy department reported on Wednesday that crude oil inventories rose 6.3 million barrels to 289.7 million barrels in the week to 29 October.

However, markets remain concerned about the low levels of US stockpiles of distillates - mostly crucial heating oil and diesel.

"People want to waitand see what happens in the winter so they don't want to keep long (bought) positions"

Tetsu Emori,Chief Commodities Strategist,Mitsui Bussan Futures, Tokyo

Distillates dropped 900,000 barrels to 115.7 million, below the average range for this time of year, the US energy department said.

Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo, said oil prices traditionally go on a downward cycle from the end of October to mid-November.

"People want to wait and see what happens in the winter so they don't want to keep long (bought) positions," he said.

Emori said $48 a barrel was a critical support level, which if breached could see prices falling further in the short term.